The influence of risk perception and attitude on the decisions to adopt residential flood insurance: Evidence from Queensland, Australia

Abstract

The 2011 Queensland floods created considerable financial pressures on governments. Many affected households suffered severe economic losses as they did not have flood cover on their home insurance policies. The absence of flood insurance could pose threats to fiscal health and has risen to the national policy agenda. This study contributes to the debates by identifying key subjective factors associated with non-insurance. It is based on a social survey involving a total of 501 residents of Brisbane, the Gold Coast, and the Sunshine Coast. A significant minority of respondents (43.8%) reported to have no flood cover. Perceived flood risk is not statistically related to the likelihood of non-insurance. This means that non-insured households are not restricted to those who are unaware of the flood risks confronting them. The insured individuals are better educated and tend to recognize the role of flood insurance in financially protecting the household. Non-insurance is also associated with the expressed preference for government compensation over insurance. The study offers two main insights for policy-makers, floodplain managers and insurers. First, raising risk awareness is unlikely to be sufficient to improving the uptake of flood insurance. Second, managing the public expectations about disaster relief may have positive impacts.